To Combat Bribery and Corruption, Understanding the Local Culture Is Essential

STEELE Compliance & Investigation Services (CIS), a global business advisory and compliance intelligence firm, is offering a rare "insider" look at what it takes to commit bribery in each of the BRIC nations (Brazil, Russia, India and China).

The "Anatomy of a Bribe" series of articles is designed to help companies combat bribery and corruption through better understanding of the local cultures that allow it to take place. In the first of the series, Anatomy of a Bribe in Russia, STEELE uses two examples of bribery, involving Diebold and Mercedes, to provide a window into the practical steps that companies and their third parties follow to commit bribery.

"Third parties may have a number of reasons to commit bribery, including the pressure to deliver results, lack of oversight, or a belief that it is the only way to conduct business because 'everyone else is paying bribes,'" says Dennis Haist, General Counsel and Compliance Advisor for San Francisco-based STEELE CIS, a leading global business advisory and compliance intelligence firm. "In-country managers, under pressure to deliver results and often unable to navigate 'red tape' may also revert to paying bribes. In nations where there is a high level of corruption, the probability that an executive will resort to illegal means goes up. The best way to combat this is for companies to better understand the local cultures where they operate."

Mr. Haist, co-author of the series on bribery, says that the Diebold and Mercedes cases illustrate common Russian bribery maneuvers and the steps multinationals might take for prevention. In the case of Daimler -- which pleaded guilty to violating the Foreign Corrupt Practices Act (FCPA) and paid a $93.6 million fine -- a tried-and-true over-billing scheme facilitated kickbacks to government officials. Diebold used phony service contracts to cover the transfer of bribes to bank officials in Russia, China and Indonesia. The company agreed to a fine of 25.2 million USD to the US DOJ, and 22.9 million USD to the US Securities and Exchange Commission to settle the charges.

"Companies can analyze 'red flags' associated with individuals and/or transactions to uncover bribery," Mr. Haist points out. "These can range from third parties appearing under-capitalized to third parties' inconsistent or ineffective internal financial controls and a record of civil and/or criminal actions. Third-party due diligence is critical to uncovering corrupt third parties and preventing compliance violations. As we are now seeing, executives of multinationals whose third parties engage in corrupt practices risk not only being fined, but even jailed. Many more countries are taking that hard line."

STEELE Compliance and Investigation Services (CIS) is a global business advisory and compliance intelligence firm offering comprehensive third-party due diligence solutions that help organizations comply with regulatory requirements and align with best practices. With more than 20 years of experience, STEELE CIS provides Fortune 1000 companies and mid-sized businesses with pragmatic solutions, including Regulatory Due Diligence, Third-Party Program Advisory Services, Program Management Services, and Compliance Analytics and Benchmarking Services. With engagements in over 170 countries, STEELE CIS delivers local and regional expertise with 'on-the-ground' resources.